A Tale of Two Middles

In the middle, though, there are two entities…and in this evolving world of e-publishing, each is taking steps to reduce the role of the other.

The combatants?

In this corner, meet the publishers. The publishers traditionally license the copyrights from the author to reproduce and distribute the books (often on a country by country, format by format basis). They are huge veterans: they may be one hundred years old, have a presence in every state, and all over te world.

In this corner, the retailers. They traditionally buy the books from the publishers and sell them to the customers (the readers). They are often nimble, used to reacting to the changing whims of the public.

That’s the way it was for decades: authors sell to publishers, publishers sell to retailers, retailers sell to readers (or people who buy the books for the readers).

In the paper world, publishers had the mechanism. An author could have self-published, but good luck selling very many copies. A store might have some books under their brand name, but not very many and not usually negotiated directly with the authors.

E-publishing means you don’t need the kind of mechanism that you needed to make paperbooks.

Authors could sell directly to readers, and some of them do. Unless you have a really big name, though, it’s hard for people to find you. That’s one of the things: publishers don’t just make books, and retailers don’t just sell them. They handle legal and accounting issues, Customer Service, pay the sales taxes to the states (when appropriate), and promote the books.

Buyers are going to tend towards aggregators, who have books from many sources. They want choices, they want to compare.

Amazon’s already made a major move to reduce the influence of the publishers: they’ve become a publisher.

As I reported recently, they now have four imprints (in addition to public domain books they offer).

This latest addition, Montlake, goes head to head with traditional publishers. It’s a genre line, specifically romance.

My guess is this is going to be a success…and Amazon will start other lines. I’d be very surprised if they don’t do a science fiction/fantasy imprint.

With the jobs for which they are advertising, they sound like a traditional full-service publisher: advertising and all.

Arguably, Amazon’s Kindle Direct Publishing is, well, also Amazon publishing. We talk about it as independent publishing, but Amazon behaves in many ways like a publisher: they pay royalties, they distribute the book, they handle Customer Service. The big difference is that Amazon doesn’t make the initial decision to publish the book…they don’t exercise editorial control. However, they do have content guidelines, and they may reject books. They have two royalty plans, and that helps guide which books are published. They have publishing requirements.

My estimate is that over 20,000 books get into the Kindle store through Kindle Direct Publishing each month.

Is it possible that Amazon’s publishing efforts grow to the point where the chain changes, and it becomes authors to Amazon to readers…with no publisher in-between? It’s possible…but might really mean a shift in content.

What can the publishers do about it? They can’t match Kindle Direct Publishing prices…their economic models are very different. I wrote this in the Amazon Kindle Community:

Here’s a scenario for an independently published booK:

The author writes the book, which takes considerable time and effort. It’s lovingly crafted. Maybe a relative proof-reads it before release. The author publishes it using Amazon’s Kindle Direct Publishing. The author continues to work at a regular job, and promotes the book in blogs and online forums.

The financial costs? Very low. If the book sells some copies, the author/publisher gets 70% of the price (if it’s $2.99…if it’s ninety-nine cents, they get 35%…typically).

Here’s a scenario for a traditional publisher (with that same author’s work):

The publisher has paid a reader to read 250 manuscripts. The reader selects this author’s manuscript, and passes it to a junior editor (who is also being paid, of course). Eventually, it gets to an editorial meeting, where the decision is made to publish this book. That’s after very high-level (read: expensive) editors have made decisions not to publish ten others.

The book is now worked on by an editor. The author (even a new one) may get an advance during this time. Eventually, other paid people working on the book include: typographers; lay-out artists; publicists (let’s say they want to promote this one); lawyers (for the contract, copyright, and so on); proof-readers; sales agents (who work with the retailers to convince them to carry the book); and a cover artist.

This book is one risk…it’s one of a few unestablished authors being published by this publisher this month. Probably only one of them will make a profit…the profit from that one has to help cover the expenses of the ones that fail. The publisher also chose to publish a public-interest title that they know will lose money, but will get them prestige (they are hoping for some important award for that one…then, maybe, it will make its money back).

Over time, the publisher has Customer Service costs (although some of those are borne by the retailer), accounting costs, ongoing promotional costs with the retailers, costs in dealing with the retailers, and more.

The costs for a traditional publisher are much higher, even though a smaller percentage of the receipts goes to the author.

Given that, the publishers have to do something different from price the books at ninety-nine cents.

In the traditional model, the publisher would set a “list price” for the book…and the retailers paid them fifty percent for it (and then sold it at whatever price they wanted).

In April of last year, five of the six largest US trade publishers implemented the Agency Model.

That redefined the retailers as “sales agents”. Technically, the publisher was now selling you the book…Amazon was just processing the sale. Amazon got thirty percent: the publisher got seventy percent. Nice, huh? Suddenly, a twenty percent increase…per book. However, they also lowered the prices…they had been list pricing the Kindle edition similarly to the hardback, and Amazon was discounting from there. The customers certainly might be paying more now.

Let me explain that one a bit.

Let’s say that the hardback was list-priced at $25…and so was the e-book. Amazon would have paid the publisher $12.50 (fifty percent). If it got on the best-seller list, Amazon was pricing it at $9.99…losing $2.51 in direct money per sale.

Now, let’s say the publisher is using the Agency Model, and prices the book at $14.99. The publisher only gets $10.49 (70 percent).

Why did Random House decide to finally join the Agency Model this year, then?

Most books (the “long tail” or backlist) are not the bestsellers and the economics aren’t the same.

Let’s say there was a $7.99 paperback and the e-book was also $7.99.

In the old model, the publisher got about $4. In the Agency Model, they don’t drop those paperback equivalent prices. They get $5.59 instad of $4.99.

Still, the publishers want more…their market share may be eroding, so they’ll need more to stay where they are now.

They could (and some do) sell from their own websites, but they run into the same issue as authors (but not to as great an extent). Is a reader actually going to go to six different sites to buy from the big publishers?

“Editorially independent, Bookish will be a place for readers to find great content about books and authors from a variety of publishers. Bookish will highlight a wide range of genres and allow readers to find their next book as well as recommend books to each other.”

Wow, editorially independent? That means I don’t have to go to each publisher’s website to read information about authors and get reviews from readers?

Hmm…what does that sound like? Oh, I know…

Amazon.

😉

Amazon already lets authors have videos and bios, and man, do they do customer reviews!

Here’s a major question:

Will readers just want to look at the traditional publishers (so far, Hachette, Simon & Schuster, and Penguin…and AOL/Huffpo), or do they want to look at them with independently published books? Not to mention, windshield wipers and cat food.

If this does work really well for the publishers, is it possible they’d stop putting their books in the Kindle store? We have to say, it’s hypothetically possible.

Don’t worry, that wouldn’t be any more anti-competitive than the Agency Model. 😉 That already makes prices the same at all the “sales agents”.

My guess?

Some people will use it initially, but they’ll have to really push it. How many people know Amazon versus knowing Hachette? Familiarity is important online…you’ve got to trust the people from whom you buy. Amazon has been cust0mer-facing for more than a decade…publishers are just really learning that.

I think the former retailers (including Amazon) have a good shot to facilitate the author-to-reader chain, through things like Kindle Direct Publishing. If Stephen King uses it, that’s a major blow for the publishers, whether they have Bookish or not. I think many authors want the services, whether it is from the publisher or from a retailer. I think customers will tend towards retailers, rather than a publisher site, even if it is multiple publishers.

I could be wrong, though. Feel free to tell me what you think. Will Bookish make Amazon get out of the book business? Will the significance of traditionally publish books diminish in the face of indie growth? Will Amazon continue to expand its publishing ventures? Make your best guesses…

14 Responses to “A Tale of Two Middles”

Great article Bufo. I certainly agree with you here. Perhaps two years ago I might have considered purchasing from a publisher direct website but definitely not now. The main reason being that I don’t trust them one bit anymore.

Two years ago, before the whole “agency model” debacle I could probably name 2 publishers at the most. I had very neutral feelings about them, not really good or bad either way; they just existed and nothing more. Since the agency model I certainly know all of the major publishers now but my neutral feelings have shifted to extreme mistrust/dislike. I would love to see the day when major authors jump ship and decide to publish directly to the Kindle on their own. If it were Stephen King who was the first major author as you suggested than that would be even better as he is my favorite author.

I got a little off track so just to wrap up: I would rather buy nothing but indie titles in the future rather than help the publishers in their “war” against Amazon by purchasing directly from their own website. Even if that means missing out on my favorite writers because of that.

Yes, I understand. I did know who the publishers were, but that was partially informed by having been a bookstore manager. They should have seized the reins sooner. I do feel a bit like they were seduced by Apple on this…

It’s hard for me to come up with a reason why I would go to a publisher site to buy a book, when I already have a (happy) relationship with Amazon. Why have one more place where I have to create an account and give my credit card and risk it being stolen from their servers? Plus, I know the book is available on all the reading devices linked to my account, so I can read it on my Kindle, and my husband can read it on his Kindle, and my daughter can read it on her Kindle, and I can read it on my iPhone if my Kindle’s not available, picking up where I left off on my Kindle. Is a publisher site going to give me that? Or is their idea of enhanced content author interviews? (Not that I don’t like author interviews, just that I’d rather have Whispersync!)

Interestingly, I actually wrote the word you used first…then changed it to “seduced”. Suckered suggests fooling people…I do like the stories about P.T. Barnum. “Suckered” is more one-way for me…when people followed the sign that Barnum put up that said, “This way to the egress”, not knowing that the word meant “Exit”, and ended up outside and had to pay to get in again…they weren’t really participating in the process. That’s one of the most complex sentences I’ve written here! 😉 When you seduce somebody, that person is participating, is wanting to get something out of it, too. One side is leading…but both sides are involved actively. The publishers thought they were putting something over somebody, too.

This is just what it connotes to me, but suckers are innocent…that’s why I went with seduced. 😉

I’m with you…I’ve gotten the same public domain book twice (once from Amazon, once from Feedbooks) so I could have both the Kindle service and a better formatted version.

The question for me is, why don’t they put those author interviews on the author’s Amazon Author Central page? I mean, if the concern is people seeing it, won’t more people see it there? 😉

Publishers have lost this fight. Their value has always been to add curation, selection and editorial services, but they have always been rather invisible to readers, letting the author names do the selling. Non-fiction publishers are better, maybe. Penguin, Dorling Kindersley, etc. are imprints that say something about the books. I think now that every book is on Amazon, publishers are going to have to really invest in crafting a distinctive brand to associate with the curational and editorial value they add to the book-production process.

I’m envisioning a whole swathe of micro-imprints that publish at the rate people consume books – very slowly, on average – but which have huge customer loyalty (like tv shows, or blogs) because their themes or series are tightly focused, and far better than the average indie. I don’t know how easy it would be to move from single-author-series to shared-universe to thematically-linked-collection while keeping customers. But if you could… Because the way charge for curational services is by subscription. I wonder how economical it would work out if you could charge a subscription for a feed of each imprint.

and one of my key points was that they should “put a face” on the business. A publisher has to be a person…sort of like some sports figures: think George Steinbrenner and the Yankees. The Huffington Post is part of this deal, and they get it…if we didn’t know Ariana Huffington, it would have had a very different and more difficult path to where it is now.

There might be concern about what happens when a public figure can no longer perform that duty, but the succession should also be an event.

Imagine Stephen King becoming a publisher…not just a blurbster for books published by other people. It wouldn’t just be his name, but his sensibility that would attract people.

Your idea of interconnected universes leverages strengths of the publishers…one of them being the ability to fail in some endeavours and still succeed overall. If you did one hundred books, some from established authors, some from brand new ones, you spread the risk. You find authors you can build, and that’s what they’ve done well.

I was thinking Amazon might do some kind of membership/subscription thing…they could do that effectively.

I don’t know that the publishers are out of it, but they have taken some solid body blows. They need to think about giving us a clear connection to a sensibility…and a person is the easiest way to do that.

I agree with Rebecca: to me, the specific publishers are invisible. I don’t buy by brand, but by author, or based on book reviews and recommendations from reviewers I trust (not just random reviews on Amazon). I think that book reviewers are the new curators – publishers buy what they think will sell; the reviewer tells me whether I’ll like it or not.

And that’s why I don’t care who the publisher is, and why I’ll probably not even look into bookish. I don’t care about author interviews, or being social about my books, I care about whether I’ll like reading the book or not.

I have mental associations with certain publishers: I’d say Harlequin has done one of the best jobs with that over the years. People want to buy a Harlequin romance…that’s probably more important and a bigger selling point than who the author is.

I have a sense of Ace Doubles, Penguin Classics, Black Lizard, and Del Rey (among many others).

However, websites are destinations…you have to choose to go away from where you are now and go there. I think that’s going to be a problem for Bookish. People are already going to Amazon…what will make them change that familiar destination to an unfamiliar one?

[…] I also want to say again that this should have traditional publishers quaking in their boots. Not that these books are going to dominate the market in the beginning, but that the publishers are being cut out (for more information on that, see this earlier post, A Tale of Two Middles). […]

[…] enough of a work to challenge the Big Six publishers. As I wrote about a couple of years ago in A Tale of Two Middles, that’s one way that Amazon can potentially work around the publishers. The e-tailer has […]